Help To Buy vs Shared Ownership: Which should I choose?

Key takeaways

• Help to Buy closed in March 2023 and is no longer available to new applicants
• Help to Buy was an equity loan (20% of the property's value or 40% in London) from the government, requiring you to put down just a 5% deposit
• Shared ownership lets you buy a share of a property (10-75%) and pay rent on the rest
• Shared ownership is more flexible, as it’s still available, open to first and second-time buyers, and not limited to new builds
• Other alternatives include Lifetime ISAs, family-assisted mortgages, and 100% mortgages

How does Help to Buy differ from shared ownership?

The main difference between Help to Buy and shared ownership comes down to how they work. Help to Buy was an equity loan from the government that helped first-time buyers purchase their home. Shared ownership, on the other hand, lets you buy a share of a property (usually between 10-75%) and pay rent on the rest, rather than buying the whole property outright.

Under the Help to Buy scheme, the government provided qualifying first-time buyers with an equity loan worth 20% of the property's value (or 40% in London) to help them buy their first home.

This made it easier to get a mortgage because buyers only needed a 5% deposit and could borrow the remaining 75% from a bank or building society.

With Shared Ownership, you take out a mortgage for your share of the property rather than the whole property. Instead, you buy a share of the property and then pay rent on the share you don't own to either a housing association or a private landlord. Because you're only buying a share of a property, you'll need a smaller deposit and can borrow less for your mortgage.

Depending on the scheme and your financial situation, you might be able to buy your share outright and live mortgage-free. Schemes that allow you to do this are often Sharīʿah-law compliant and can be used as an alternative to Islamic mortgages.

When you buy a shared ownership property, it’s possible to buy more shares in your home over time. This is known as staircasing and could see you owning the home in full in future.

Both shared ownership and Help to Buy are designed to help first-time buyers with a small deposit or modest income to get on the property ladder. If you are looking to buy your first home but are struggling to save up a deposit or get the mortgage you need, talk to Tembo. We specialise in budget-boosting schemes designed to help you improve your mortgage affordability so you could buy sooner.

Which is better, Help to Buy or shared ownership?

The Help to Buy scheme is now closed to new applicants, which means shared ownership is the main government-backed option available if you're comparing these two schemes.

Shared ownership also offers some features that Help to Buy didn't provide. Help to Buy was only available to first-time buyers and could only be used for new-build properties. Shared ownership can be used by first-time buyers and second-time buyers, and although a lot of shared ownership properties are new builds too, not all of them are.

You might also like: Rent vs Buy: Which is right for you?

What other alternatives are there?

Beyond shared ownership and Help to Buy, there are several other ways to get on the property ladder that could work for you.

Lifetime ISAs

A Lifetime ISA is a tax-free savings account where your contributions are topped up with a 25% government bonus for free. You can use the money you save in your LISA towards your first home purchase, retirement or both. You can open a Lifetime ISA with as little as £10 and deposit up to £4,000 into it each tax year. So you could get up to £1,000 a year from the government towards your deposit! You can use the money in your Lifetime ISA to purchase a shared ownership property or a regular home.

Family-assisted mortgages

If you have financially comfortable parents who want to help you buy a home, a family-assisted mortgage, a.k.a a guarantor mortgage, could be for you. Rather than contributing cash towards your deposit, they can use their income, savings, or property to boost your borrowing potential.

There are a number of different ways to do this, and the right option for you will depend on your circumstances. Take a look at our guide to guarantor mortgages to learn more.

100% mortgage

With schemes such as Skipton's Track Record mortgage, you can get a mortgage for 100% of the property's value, without needing any deposit. It works by using your track record of paying rent each month instead of requiring a traditional deposit, allowing you to get a 0% deposit mortgage. This allows you to stop renting and start building up equity in a home of your own.